Opinionated thoughts on the most interesting trends and ideas in cryptocurrencies, blockchains, dapps, DAOs & the growing token economy.

Got forwarded this email? Subscribe here.Subscriber? We'd appreciate if you could forward it to someone who would find it valuable. 🙏

Berlin Blockchain Week

We'd like to extend a warm thank you and some well deserved congratulations to the Berlin crypto scene, who put together a community-organized, decentralized conference with the Berlin Blockchain Week.

We've attended many of the events, and had a blast. The amount of development activity, brain power and genuine commitment at the Factory building in Görlitzer Park over the hackathon weekend was particularly refreshing. We are gutted to have missed out the last day when teams presented the actual projects that came to live. 🤯

As to how our week unfolded, Stefano moderated a panel on security tokens organized by Neufund and Brickblock, and one exploring sustainability in supply chains organized by Centrifuge, with Provenance and Einhorn.

Yannick and Alex hosted an amazing breakfast together with our portfolio companies and 30-ish other founders, so thanks to Centrifuge, NuCypher and Messari for helping out with that!

Thanks to June Fund, Neufund and Consensys for their amazing dinners, Cherry Ventures and Point Nine for the great sessions and the ETHBerlin organizers for a kick-ass conference.

It's a new paper with Zoë Hitzig and E. Glen Weyl, which explores the problem space of funding for public goods and how to optimize it compared to fully market-based solutions.

Weyl is currently all the rage in parts of the crypto (and non-crypto) scene because of his Radical Markets book (where concepts like Quadratic voting and Harbinger taxes make appearances).

After the book got published, Vitalik started a relationship and collaboration with the author, and one of the outputs is this new paper.

Trying to summarize it in a few words, it's a new way to allocate funding for public goods, by understanding what the utility of the good is to end users, and stepping in with some public funding to make sure that those goods are funded appropriately.

The main thought that comes to mind here is, as highlighted in the past, the pace of innovation and how interdisciplinary it is.

If you're in the crypto space, you're either forced, encouraged or led to think about many, many different topics including technology in a broad sense, economics, monetary theory, policy, philosophy, politics and governance.

It's hard to find other spaces bubbling with so much new thinking, and I suspect that we will look back on this period as something truly special.

Nic Carter comes out with a bomb, sort of "denouncing" the role of many players in the crypto ecosystem as having the main goal of "siphoning money from retail investors and depositing it into the pockets of altcoin creators and exchange operators" (and ranking sites).

I feel there could have been some more details about the benefits of the Web 3, but otherwise think that we will be quoting articles like this in a few decades when it's all built out and part of our day-to-day infrastructure.

The stablecoin skepticism continues in the space, with a good post on the likely instability scenarios for most non-fully-collateralized coins.

There's a good summary in the post itself of the main thesis

"financial markets are fat-tailed. That is, the probability of large price movements is much larger than people generally assume. While the probability is finite and can be calculated, the size of the expected movements is infinite, and therefore the assumption that the price will remain within any given trading range is false"

which has been our position for a long time (and why we never got particularly excited by any stablecoin project we've seen so far).

The conclusion is that "the only form of sensible stablecoin or token representing another asset without systemic risk is the fully collateralized kind. The reason to create such a stablecoin is to enhance fiat currencies and imbue them with the cryptographic certainty, fast settlement time, and international transportability of crypto-currencies."

My view is even more extreme, and that we're all playing nice games and all, but at the end of the day (in a few decades), there will be no need for stablecoins, as Bitcoin will be the unit-of-value stablecoin.

The concept of atomic swaps is here to stay, and it's cool to see it advance in so many directions.

The team at sparkswap, that we first featured in issue #60, have created this new Layer 2 atomic swap method (they're doing it in the context of a decentralized Shapeshift, with Bitcoin/Litecoin trades that settle in seconds).

MCC dropped a research piece on TCRs this week. As always it's very well articulated and easy to read, providing a very realistic view of the pros and cons of this often over-hyped crypto 'primitive'.

Other than the obvious features of a TCR, MCC argue that:- centralized list curation is most of the times satisfactory enough for the majority of users- maximizing token value != high-quality curation, leading to attacks/dishonest behaviour- the model fails when addressing subjective information- token pricing is very challenging.

Treasury selling (specifically of ETH) by crypto projects has been widely discussed and analyzed recently. A tweet about Augur this week sparked further debate around best treasury management practices, with thought-provoking responses from CZ and Joey himself.

In this post the Mosaic research team takes a deeper look and finds that many projects are likely trading at negative enterprise values.

The post smartly outlines that this doesn't mean much in reality, because by investing in the network there really isn't any guarantee or claim on the treasury assets.So in the end it should just be regarded as "potential firepower" that the team / organization has at its disposal to make the network successful.

Brayton from Boost notes how even many of the investors and stakeholders in the ecosystem haven't really been using Dapps.

The #build meme is good and all, but we need to get to serious usage or at least interest fast.

Finding the right direction and hooks to get actual users on a decentralized app soon is paramount for this community. We're especially bullish on the trajectory of projects like Spankchain, that have this clearly as their first goal, and look forward to seeing more of them.

One to read while strolling down the boulevard of broken dreams, but in hindsight an inevitable step for a centralized company operating at the edges of the regulatory table, and yet another Satoshi ha-ha moment.

Dubbed by the founder as "a precautionary move to derisk the company amid an ever-changing legal grey area”, it clearly feels like ShapeShift found itself cornered and without better alternatives.

This makes us wonder about the future of "decentralized exchanges" operated by centralized entities, as it feels like they could easily be next in line making similar moves. There's a well written piece calling the beginning of the end for the open finance movement, while in reality it's still probably only the first inning.

Bloomberg coverage of the news has some other quotes from the CEO, though the headlines sound overly catastrophic. Onwards.

In other news:

- ETFs. Supposedly Coinbase has been talking to BlackRock about a developing a crypto ETF, though so far the asset manager has not made any concrete recommendations.

- Talent #1.Last week TE was about the blurring line between crypto and academic research. This week A16Z have hired a professor and lead of the Applied Cryptography group at Stanford.

- Talent #2. Our friend Ha explains why he just went all in on crypto and joined Cambrial Capital, a new crypto fund of fund. A match made at the latest Unplug retreat!

- Talent #3. David Sacks (ex-Paypal and co-founder of Harbor) joins 0x advisory board as the security token compliance tech company partners up with the decentralized exchange protocol. The security token stack continues to shape up.

- Layoffs. With trading volumes materially down, Kraken has laid off 10% of its San Francisco-based client services team.

- Crypto art. A Warhol painting was tokenized and raised $1.7M for 31.5% of the artwork at a valuation of US$5.6M, with the auction running entirely on the blockchain. Apparently the traditional auction for the paining failed 2x, before attracting 100 investors through the Maecenas platform.

EU finance ministers met in Vienna this weekend and Reuters had a sneak peak at the preparatory report apparently, which argues for stricter EU-level regulation of crypto exchanges and clearer rules on ICOs.